Ever more granular, ever faster

Börsen-Zeitung
By Stefan Schaaf, Frankfurt
17 April 2018

AxiomSL explains how regulatory requirements are challenging outdated IT systems

The need for regulatory reporting at high speed, and at an increasingly detailed level, is posing a challenge for bank IT systems.

As Buncak Saykam, Business Development Manager at software provider AxiomSL EMEA told Rules & Regulations in an interview, this trend towards granularity is particularly evident in AnaCredit statistics. “It’s about much more granular data at higher frequencies,” he says.

Mifid II reporting has also been a challenge. In his opinion, many areas went well at the start, but some things had to be improvised. Therefore, Saykam believes that many banks must now seek long-term solutions.

AnaCredit is a database run by the ECB banking supervisors (the Single Supervisory Mechanism), and contains detailed information on individual bank loans in the Euro area. The name stands for Analytical Credit Datasets. As the ECB explains, new data and existing national credit registers will be used to set up a harmonised database that supports central banking functions such as decision making in monetary policy and macroprudential supervision.

Country specific formats

In addition to AnaCredit, national central banks define their own minimum data requirements for the collection of certain loan characteristics, and have country-specific submission formats as well as different time frames for test windows.

“These small differences pose major challenges for banks, especially banks with branches throughout the Eurozone,” says Saykam. For example, in Ireland and Slovakia every loan must be reported, while in Germany only loans upwards of Euro 25,000 are covered.

For the banks AnaCredit means a considerable effort, especially to deliver the data in the required format. “The data quality leaves a lot to be desired,” Saykam observes. “Some of the data is not in a state in which the Bundesbank or the European Banking Authority can do anything with it. And there is also data redundancy.”

In his view, the main reason for poor data quality is usually old and creaking IT systems – but modernising core banking systems remains highly challenging. AxiomSL in particular offers software for reporting and risk management.

In addition to data quality, there are also problems associated with the collection and storage of data. Data is often not properly maintained, and there are no validation checks.

“Old systems cannot process data in the same way as new systems,” says Saykam. And there could be better use of data collected for reporting purposes for internal bank management.

Meta-analysis

AnaCredit is already up and running, though the first data transmission to the shared AnaCredit database will take place in November 2018, with September 2018 as the data reference period. From then on, data collection will continue on a monthly and quarterly basis.

Another major regulatory project, Mifid II, has already been fully in force since the beginning of the year.

According to Saykam, the introduction went quite smoothly, but banks had to improvise in some areas. “There were many tactical solutions – but now it’s a matter of positioning yourself strategically,” he emphasizes. Often there is no meta-level that consolidates the various data sets.